Kill Your Good Ideas
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The U.S. Chamber of Commerce Is Hurting U.S. Competitiveness
What do Exelon, Pacific Gas & Electric, PNM Resources, and Nike all have in common? In the last week they all dropped out of the U.S. Chamber of Commerce over the group's stance on climate-change legislation.
Sadly, the Chamber's COO told the Wall Street Journal that these defections will not change the Chamber's misguided positions, including constant carping about the potential costs (almost always overstated) of climate change and calling for a mock "trial" on the science of climate change.
Here's why the Chamber is out to lunch. First, tackling climate change is good for business and improves the competitiveness of our industries and the country as a whole. And, oh, on a related note, the Chamber is increasingly out of step with its own members — because they do see how going green will help their businesses.
As so many companies already know, climate legislation will help our nation's businesses stay competitive on the global stage. But don't listen to me, listen to mega-venture capitalist John Doerr and GE's Jeff Immelt. The two staunch capitalists wrote a powerful op-ed in the Washington Post that laid out the series of crises we face: economic, climate, energy security, and now a "competitiveness crisis." As they put it, "this crisis is particularly evident in America's worldwide standing in the next great global industry, green technology."
Their evidence: One in ten of the world's biggest solar and wind companies are based in the U.S. We're falling behind China, Germany, and others fast. Their solution, in part: "Send a long-term signal that low-carbon energy is valuable. We must put a price on carbon and a cap on carbon emissions." With the right price signals, we invest, innovate, and move off of fossil fuels (and stop sending $700 billion every year in oil payments to countries that don't like us — but that's a separate story).
And with the right policy in place around the world, according to HSBC, climate change-related products and services will be a $2 trillion market by 2020. That's a big pie to compete for. But without the right price signals here in the U.S., we can't compete. It's as simple as that.
But instead of listening to the companies making these arguments, the Chamber is waging a campaign to make it seem like the entire business community is against climate policy. That's absurd. A growing number of large companies have actually joined groups — such as the U.S. Climate Action Partnership and the Pew Center for Climate Change — to lobby specifically for more environmental legislation.
The ranks of the signatories include five of the Fortune 15: GE, HP, Bank of America, Citigroup, and IBM. The reasons for their support are varied, from seeing the writing on the wall and wanting a seat at the table to seeking direct business benefits from higher carbon prices (as in selling more wind turbines). The total revenues of the companies that have joined these groups is now over $2.5 trillion.
It would be easy to write off the companies that will benefit from carbon pricing and cap-and-trade, such as Exelon, the nation's leading nuclear provider. It's just in their business interest, critics might say. But isn't a Chamber of Commerce supposed to promote what's in business's best interest? There are forces aligning to make this larger case to Congress and other leaders — for example, check out an important new group that I support, the Clean Economy Network.)
Last week I wrote about military leaders who are making the case that climate change is a national security issue. Now we have power companies and business leaders talking about climate change as an issue of national competitiveness.
I chalk up the Chamber's problems to an issue with how they define their role in promoting "commerce." Not all governmental organizations think of their mission so narrowly; for example, I've been invited to keynote a summit on "Sustainability and National Competitiveness" by another organization that plays a role in the issue — the U.S. Department of Commerce.
Let's just hope that the Chamber of Commerce catches on.
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Best Posts of the Week (Oct. 5, 2009)
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7-Eleven Store Owners Ask Congress to Reduce Credit Card Fees
This is a post by guest blogger Don Sniegowski, the founding editor of the daily franchise news site BlueMauMau.
7-Eleven franchise owners stormed Washington on Sept. 30 to deliver 15,000 petition booklets to Congress, with 1.66 million signatures. Thousands of the convenience store chain's franchisees asked customers to sign a petition calling for Congress to prohibit credit card networks and card-issuing banks from charging high transaction fees to merchants. The signature drive ran from June 22 through August 10 at store counters coast to coast.
Joe DePinto, 7-Eleven's CEO, said, "Customers share our frustration over the hidden fees that American retailers and, ultimately, consumers are forced to pay. They, too, want Congress to take action to regulate these unfair fees, which are the highest in the industrialized world."
According to the chain, the signatures are the largest number of signatures collected for a public policy issue on record, beating a healthcare reform petition submitted to Congress earlier this year with 1.3 million signatures.
Rep. Peter Welch (D-VT) told the crowd of franchisees and attendees gathered at a press conference organized outside Capitol Hill, "This is democracy in action." And Rep. Zoe Lofgren (D-CA) added, "Who owns this country? It's not the banks." He added, "It's the people who signed these petitions."
David Hendricks, a franchise owner of two 7-Eleven stores and a board member of 7-Eleven's independent franchise owners association for Greater Los Angeles, observes that since 7-Eleven Japan took over in 2005, 7-Eleven North America eventually got to the point where the franchisor decided to share the processing fees 50-50 with their franchisees. "Franchise owners didn't have input or a voice on that choice," he says. "By 7-Eleven transferring 50% of the costs to the franchisees, they had 6,000 members who were now motivated to go to Congress to ask for regulation of interchange fees."
Franchise owner Navdeep Bassi collected the most signatures of any 7-Eleven, gathering 5,726 at his Costa Mesa, California store. "Every issue has to begin somewhere, and I have an obligation to the local community because they are also my clients," Bassi told the National Association of Convenience Stores about his support of the petition drive. "These fees affect my customers as well as me, and I am just doing my part to fight the unfair practices of these credit card companies."
However, credit card companies and others have been highly critical of the retail chain's petition efforts. Chris McWilton, president of U.S. Markets at MasterCard, accuses 7-Eleven of having tricked customers to sign the petition by implying that consumers would save money. "It's surprising that 7-Eleven, a company that prides itself on convenience, would mount such an aggressive campaign against the most convenient form of payment. Even 7-Eleven itself has said many times that accepting payment cards increases their sales, enhances safety and convenience for store operators, and improves customer satisfaction," said McWilton.
Shawn Miles, Head of Global Public Policy at MasterCard stated: "To understand what would happen to American consumers if 7-Eleven got its way, you only need to look at what happened when the government of Australia artificially lowered interchange. Consumers there are now paying significantly higher fees to use their credit cards and receiving fewer benefits, while no one has found any real evidence that merchants lowered prices. Merchants simply pocketed the savings, and consumers were disadvantaged. None of that, however, was explained in 7-Eleven's petition."
Franchisee Hendricks strongly disagrees with MasterCard. "I think Australian merchants pay half a percent. In Britain they pay one percent. American merchants pay as much as three percent," he observes. "United States is one of the only countries in the free world where credit card companies won't lower interchange fees."
Hendricks emphasizes the hurt that exorbitant credit card fees have on convenience store owners. "We have two stores in California. 50% of our credit card processing fees is about $800 per month. The other store is almost a $1,000 a month. Our [interchange] fees are based on the total transaction, not on a merchandise purchase. If a customer bought a thirty-five cent pack of gum and received $30 cash back so that $30.35 was run on the card, I would pay the percentage of fees based on the money I gave back as well, not just on the merchandise that was sold. My store allows customers $40 or $50 cash back, and it has typically 50 of those in a day. I have to pay interchange fees on all of that."
Don Sniegowski is the founder and editor of Blue MauMau, a daily business news site for franchise buyers and owner-operators. Previously, he led global field operations and franchise development for a quick-print franchising firm. Sniegowski also helped lead global publishing efforts for trade publisher Global Sources Media and led Asia-Pacific retail and operations for Franklin Covey.
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Why the U.S. Tech Sector Doesn’t Need Domestic Manufacturing
In their article "Restoring American Competitiveness," my colleagues Gary Pisano and Willy Shih assert that excessive outsourcing has undermined the competitiveness of the U.S. high tech sector. I disagree. The loss of some manufacturing in a high cost country such as the U.S. is inevitable and need not lead to a decline in competitiveness. Indeed, the future of U.S. competitiveness in high tech industries such as computers, software, communications, and electronics may depend more on the transition to services than trying to retain the country's manufacturing base.
Some of the very examples of harmful outsourcing cited by Pisano and Shih prove my point:
Apple. It was one of the most vertically integrated manufacturers in the computer industry through the mid-1990s, which almost bankrupted it. While much has rightfully been made of Apple's outstanding design capabilities, Steve Jobs's brilliant move to outsource all manufacturing and to incorporate as many industry-standard components as possible has been a key driver of Apple's profitability. And while still predominantly a product company, Apple has become highly successful in services, ranging from its bricks-and-mortar retail stores to its iTunes website that distributes songs, video, and applications.
Hewlett-Packard. HP has become the world's leading computer company by focusing on sales, marketing, and distribution of computers made at very low cost in Taiwan and China. In comparison, archrival Dell, which was widely celebrated 10 years ago as one of the world's best manufacturers, is now saddled with high cost factories and is struggling to compete.
Semiconductors. Pisano and Shih lament the "migration of semiconductor foundries to Asia." In fact, companies like Taiwan Semiconductor Manufacturing Corporation, the world's leading foundry, enabled the creation of an entirely new business in the U.S: the fabless semiconductor industry. Some of America's (and the world's) most successful semiconductor companies, such as Qualcomm, Broadcom, and Nvidia, may never have existed without the capabilities that TSMC brought to the market.
Follow the HBR Debate
- Gary P. Pisano: The U.S. is Outsourcing Away Its Competitive Edge
- David B. Yoffie: Why the U.S. Tech Sector Doesn't Need Domestic Manufacturing
- Robert H. Hayes: Global Outsourcing Is High Tech's Subprime Mortgage Fiasco
- Andy Rappaport: Outsourcing Isn't a Problem for Silicon Valley But Is for Detroit
- Willy C. Shih: The U.S. Can't Manufacture the Kindle and That's a Problem
- Ed Catmull: Pleasing Wall Street is a Poor Excuse for Bad Decisions
- David. A. Patterson: Scientists and Engineers on Boards Will Keep Focus on the Long Term
- Stephen R. Hardis: Beware of Gov't Solutions for America's High Tech Industry
- David A. Patterson: Restoring DARPA Is the Key to Preserving the U.S. Lead in IT
- Deborah L. Wince-Smith: Washington Must Help U.S. Regain the Lead in Manufacturing
- Robert H. Hayes: Gov't Should Enlist Foreign Companies' to Rebuild America's Industrial Infrastructure
Maybe the most important point to make is that U.S. has been moving towards a service economy for the last 100 years. In the long run, services will become the core of the U.S. tech world as well. The most successful U.S. computer, software, communications, and electronics companies are adding services on a global scale to complement and, in some cases, replace their core product businesses. IBM, for example, has moved from being a product company to the world's largest technology-services company. Google, which is widely perceived to be the leading technology company in the world today, generates all of its global revenues as a service. And Amazon and Salesforce.com are but two of the many U.S. firms positioned to prosper as cloud computing and software-as-a-service (SaaS) cause high tech services to accelerate.
In short, the decline of manufacturing in the U.S. will not necessarily bring about the decline of the U.S. high tech sector. Ultimately, more and more technology will be delivered via services, where American firms can and should play a world-leading role.
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